1. 1 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Working Group for Chapter 9 – Financial Services Bilateral screening: Chapter 9 PRESENTATION OF MONTENEGRO Brussels, 10 June 2013

2. Financial Services 2 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial Services Voluntary pension funds in Montenegro Sanja Radusinović Securities and Exchange Commission of Montenegro sradusinovic@scmn.me

3. Financial Services 3 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services OUTLINE OF THE PRESENTATION PENSION REFORM IN MONTENEGRO PENSION SYSTEM IN MONTENEGRO LEGAL FRAMEWORK:  LAW ON VOLUNTARY PENSION FUNDS THE LEVEL OF COMPLIENCE DYNIMICS OF CONVEREGENCE.

4. Financial Services 4 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services LEGAL FRAMEWORK EU legislation: Directive 2003/41/EC of the European Parliament and of the Council of 3 June 2003 on the activities and supervision of institutions for occupational retirement provisions (OJ L 235, 23.09.2003 p. 0010-0021) – this Directive lays down rules for the taking-up and pursuit of activities carried out by institutions for occupational retirement provision. National legislation: Law on voluntary pension funds (OG of Montenegro No 78/06, 40/11) – this Law regulates the conditions for establishment of pension fund managing company, for the organization of voluntary pension funds based on individual capitalized savings and their operating, and for the custodians.

5. Financial Services 5 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services PENSION REFORM IN MONTENEGRO Upon the recommendation and in cooperation with the World Bank, the Government committed itself to the concept of three pillar pension system. This concept is envisaged reform of the first pillar of pension insurance, and implementation of the second and third pillar, as a mandatory or voluntary pension insurance. Pension reform has started in 2004 with the new Law on Pension and Disability Insurance. In April 2005 the Government has adopted a strategy for pension and disability insurance, which stipulates the introduction of a multi-pillar and long-term sustainable systems, and security to the larger social and material safety and the total level of pensions. In accordance with Economic Reform Agenda for Montenegro (2003 – 2007), which was innovated in April 2005, determined time schedule for activities that are necessary to establish a normative framework for the II and III pillars.

6. Financial Services 6 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services PENSION SYSTEM IN MONTENEGRO The pension system in Montenegro is formed of two pillars (first and third) after the pension reform conducted in 2004. In that way there is an opportunity for the people in pension age to increase their income through participation in state and private pension schemes. The first pillar is build on collective principle and is managed by State institution for pension insurance. The contributions, which are paid by currently working people, are used for payments to the pensioners. The pension insurance is compulsory and includes the whole working class in the country. The third pillar represents the system of voluntary pension savings. It is not obligatory and it is fulfilled by voluntary pension funds. The participation in these funds depends on the will and the capabilities of the people to provide themselves for supplementary income. The third pillar functions on capital principle and the contributions are accumulated in personal account of each pension fund member.

7. Financial Services 7 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services LAW ON VOLUNTARY PENSION FUNDS The regulatory framework for the private pension system in Montenegro is set by the Law on Voluntary Pension Funds (OG of Montenegro No 78/06, 40/11) which came into force in December 2006 and is specified by a set of Rules issued by the Commission. The undertakings regulated by this Law represent pillar III of the pension system. This Law regulates the conditions for establishment of pension fund managing company, for the organization of voluntary pension funds based on individual capitalized savings and their operating, and for the custodians. With establishing of voluntary pension funds, citizens are offered an opportunity to, regardless of years of service, employment relationship or years of age, through the payment of contributions to realize additional source of income and ensure safe future.

8. Financial Services 8 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services PENSION FUND MANAGEMENT COMPANY Pension Fund Management Company is a joint - stock company established for the purpose of organizing and managing a voluntary pension fund and cannot perform another activity. The cash amount of the initial capital of the Management Company cannot be lower than €250,000. The Management Company must obtain the permission from the Securities and Exchange Commission for performing activities of Pension Fund management. Montenegro has two pension fund management companies: Atlas Penzija and Market Invest.

9. Financial Services 9 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services VOLUNTARY PENSION FUND Voluntary Pension Fund - means a voluntary pension fund established for the purpose of collecting money by payment of contributions of the fund members and for investing such assets for the purpose of increasing the value of the assets of the fund. The Pension Fund shall not have a status of a legal person. Foundation of the Pension Fund can be performed only by the Management Company. Voluntary pension fund may be an open pension fund and a closed pension fund. The Open Pension Fund is a pension fund to which access is given to all natural persons. Closed end Pension Fund is established for the needs of employers, trade unions and other organizations.

10. Financial Services 10 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 17: Chapter 9: Financial services VOLUNTARY PENSION FUND There are two voluntary pension funds in Montenegro:  Penzija Plus, which is managed by Atlas Penzija, started operation in February 2009.  Market Penzija, which is managed by Market Invest, started operation in July 2009.  As of 23.05.2013, the net assets of the two operating pension funds amount to EUR 353.149,79 and the number of their members is 2.191. A person may at the same time join one or more voluntary pension funds. Member of the Pension Fund may only have one account in that fund at the same time.

11. Financial Services 11 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services MEMBERSHIP IN VOLUNTARY PENSION FUND A natural person shall become a member of a Pension Fund by signing a Membership Contract with the Pension Fund Management Company and paying a first contribution. Pension Fund Management Company managing Open Pension Fund may not withdraw a application for membership from any person. Pension Fund Management Company managing Closed Pension Fund may accept application for membership only from the persons who are employed at employers, the members of trade unions or any other organization for whose needs the Pension Fund has been organized.

12. Financial Services 12 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services MEMBER’S RIGHTS Information on pension savings, rights and other details member can find in the Rules on managing of Pension Fund, Membership agreement and in the Informative prospectus. The size of the personal installment for voluntary pension savings is determined by the individual. There are no limitations in the terms of size and frequency of installments. There are no restrictions about what age a person can start saving for pension. The contributions paid to a Fund as well as transfer payments shall be credited on behalf of individual accounts on a Member’s name. The amount standing to the account of a Pension Fund Member represents personal assets of that person. The contributions paid to a Pension Fund as well as transfer payments received by the Fund shall be converted into accounting units.

13. Financial Services 13 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services MEMBER’S RIGHTS Pension Fund is owned by its Members whose individual right of ownership is determined as per the amount of assets on their accounts. The document on the share serves as an evidence of ownership in the Pension Fund. A Pension Fund Management Company shall, not less than once a year, deliver to each member of a pension fund written information on the assets on his or her account, on dates and amounts of payment of contributions that he or she had during particular period. At the fund member’s request, A Pension Fund Management Company shall deliver to that member a notification on cash value of the assets on his or her account. Member can check cash value of the assets on his or her account via the Internet page of the Fund Management Company.

14. Financial Services 14 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services WITHDRAWAL FROM THE PENSION FUND A Member of the Pension Fund may withdraw from membership in a voluntary pension fund by withdrawing amount standing to an individual account of a Member, deducted for the amount of the fee for withdrawing, upon becoming 50 years of age. This amount may be withdrawn as follows:  not more than 30% of the amount shall be paid in cash on the date of fulfilment of requirements determined by the Rules on Managing the pension fund and Membership Contract, and the remainder in the monthly or periodical annuities, in the period not longer than three years as of a date of withdrawing from the Pension Fund;  to transfer the total amount upon the request of the Member to the business company performing the business of pension payments, in compliance with the regulations.

15. Financial Services 15 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services COVERING OF THE COSTS OF MANAGING OF PENSION FUND The Pension Fund Management Company is entitled to a compensation of the costs of managing of pension funds in a certain amount from:  the contributions paid,  the net assets of the pension fund;  a fee for withdrawing from a Pension Fund; The total amount of the fees that a Pension Fund Management Company may charge shall be determined by the Rules on Managing of Pension Fund and must be enunciated in a consolidated manner in every Membership Contract.

16. Financial Services 16 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services PERMITTED INVESTMENTS ARTICLE 38 LAW 1.The assets of a pension fund may, be invested in the following types of assets: short-term notes and other short-term securities issued by Montenegro and local governments, as well as short-term bank deposits, in the manner specified by the regulations of the Securities Commission, long-term bonds and other long-term securities issued by: 1) Montenegro and local governments; 2)joint stock companies registered in the Securities Commission which are traded at the stock exchanges in Montenegro; 3) other countries, which are traded in the organized capital markets of the OECD countries and EU member states; 4) foreign non state entities, which are traded in the organized capital markets of the OECD countries and EU member states; stocks issued by: 1) joint stock companies registered in the Securities Commission which are traded at the stock exchanges in Montenegro; 2) foreign joint-stock companies and close – ended investment funds, which are traded in the organized capital markets of the OECD countries and EU member states; units of domestic and foreign open-end investment funds, taking account of the fact that such funds invest in the securities of the issuers registered in Montenegro or some of the OECD countries or EU member states; any other form of investment specified by the regulations of the Securities Commission, other than the investments referred to in Article 39 of this Law. real estate property at the territory of Montenegro. 2.The pension fund may acquire no more than10% of the particular securities issue. 3.Not more than 10 % of a pension fund’s assets may be invested in the securities of a single issuer. In exception with limitations stipulated in paragraph 2 and 3 of this article, a pension fund’s assets may be invested in a assets stipulated in paragraph 1 item 1) and item 2) line 1) without any limitations.

17. Financial Services 17 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services PROHIBITED INVESTMENTS ARTICLE 39 LAW The assets of a pension fund shall not be invested in: 1) stocks, bonds and other securities which are either not traded on stock exchanges or organized markets, except the units of open-end investment funds; 2) the assets which can not be alienated under the law; 3) physical assets which are not traded on organized markets and the value of which is uncertain (including, for example, antiques, works of art and motor vehicles), 4) stocks, bonds and other securities issued by: any stockholder of a pension company; the custodian of a pension fund; any person who is a related person in relation with the entities listed in Items 1 and 2 of this Paragraph; management company; brokers or dealers houses, or licensed bank performing on behalf of the Managing Company mediation activities in trading with securities 5) such other assets as specified by the Securities Commission.

18. Financial Services 18 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services CUSTODIAN Custodian - means a business organization that Pension Fund Management Company, based upon the contract, entrusted with the performing of operations related to supervision of managing pension funds assets. The Custody shall be obliged to inform Securities Commission on every order submitted by the Pension Fund Management Company that is not in accordance with the law, Securities Commission’s regulations and Rules on Managing of Pension Funds. Five banks have been authorized by the Commission to conduct custody activities for voluntary pension funds.

19. Financial Services 19 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services SUPERVISION Supervision over foundation and operations of Pension fund Management Company and Pension Funds shall be performed by the Securities and Exchange Commission in compliance with provisions of the Law on voluntary pension funds and the Law governing securities. The Securities Commission shall perform supervision over the Pension Fund Management Company and Pension Fund by giving approval to their regulations and performing control of their operations in compliance with this Law. The Commission may also perform the control of a Custody within the activities it performs in compliance with the Law on voluntary pension funds.

20. Financial Services 20 M O N T E N E G R O Negotiating Team for the Accession of Montenegro to the European Union Chapter 9: Financial services THE LEVEL OF COMPLIENCE/DYNAMICS Current status: No compliance with directive 2003/41/EC. (partial compliance: some of the conditions for carrying out of pension insurance activity; the requirements for a custodian and an investment manager of the fund; some of the requirements for information disclosure and reporting of the funds; some of the requirements for permitted investments) Full compliance shall be achieved with adoption of the new Law on Voluntary Pension Funds. Dynamics of convergence: until the accession of Montenegro to the EU.

21. 21 Thank you for your attention! QUESTIONS